International Moats: High-Flyer
Grupo Aeroportuario del Centro Norte (OMAB MM, 15.31%), which operates 13 airports in Mexico and handles roughly 15% of domestic air travel according to Morningstar, was the top contributor to International Moat Index returns in July. Morningstar recently increased its fair value estimate from $42 to $45 per share as a result of the strengthening Mexican peso relative to the U.S. dollar. Interestingly, the election of Andrés Manuel López Obrador as president also impacts Morningstar’s fair value model because of expectations that he will cancel or delay existing plans to build a new Mexico City airport. This may limit Centro Norte’s growth potential.
Grupo Aeroportuario del Centro Norte (OMAB) has performed well this year so far, with a return of nearly 25%.
The Mexican stock surged 15.3% in July and was the second-best-performer for the Morningstar International Moat Index (MOTI) in July—after GEA Group, which returned 15.9%. Meanwhile, Japanese conglomerate Softbank (SFTBF) surged 14.9% in July.
Despite the election of Andrés Manuel López Obrador, OMAB’s stock has risen by an additional 5% this month.
OMAB said that terminal passenger traffic at its airports increased 8.8% year-over-year in July. This level is a slight decline from the 9.1% traffic growth the company saw in June. Meanwhile, domestic traffic at its airports climbed 9.7%, and international traffic rose 1.8%.
Grupo Aeroportuario del Centro Norte’s revenue has almost doubled over the last four years, and it has a healthy profit margin of around 30%. OMAB has a ~1.4% weight in the Morningstar International Moat Index.
One of the reasons why the Morningstar International Moat index has underperformed this year is that the dollar has started to strengthen again, dampening international returns.